Thermal Renewable Energy Certificates (RECs) in New Hampshire
In 2012, the New Hampshire Legislature passed SB218 that formally incorporated ‘useful thermal energy generated from renewable sources, including geothermal, into the New Hampshire Renewable Portfolio Standards. SB218 charged the NH Public Utilities Commission (NH PUC) with developing rules for metering and reporting the production of thermal renewable energy and requiring electricity producers to generate or acquire equivalent RECs as part of their renewable energy portfolio.
On June 19, 2014, the NH PUC issued an Order for the thermal REC program to go live using draft rules as they work their way through the Rulemaking process. This means that owners of geothermal systems installed after January 1, 2013 can begin metering thermal renewable energy produced and be awarded RECs. In the initial release of the program, only heating qualifies as ‘useful thermal energy’ — due primarily to the ‘can be metered’ requirement — so there is plenty of time to get metering equipment installed before the 2014 heating season begins.
What are Thermal RECs?
Thermal RECs are similar to Solar RECs (SRECs) in that 1 Megawatt hour (MWh) earns 1 REC. Energy production is reported to the New England Power Pool Generation Information System (NEPOOL GIS) that mints the RECs, which are then typically sold by an aggregator to REC purchasers (typically electrical utilities). According to SB218, NH utilities are now required to produce a percentage of their energy from Class I renewable thermal technologies, including geothermal heat pumps. SB218 requires that electricity producers either produce or acquire, through the purchase of RECs, approximately 40,000 MWh of Class I renewable thermal energy in 2014; 80,000 MWh in 2015; and 160,000 MWh in 2016. By 2017, Class I thermal RECs will account for almost 10% of the total Renewable Portfolio Standard in New Hampshire.
What are Thermal RECs Worth?
There are two primary factors that contribute to the value of RECs. The first is the Alternative Compliance Payment (ACP). When utilties are unable to produce or acquire Class I thermal RECs, they are required to pay an ACP into the Renewable Energy Fund; part of the Fund is used to support renewable energy projects in the State. The ACP is set by the legislature, and for Class I Thermal in New Hampshire, the ACP is $25 per REC. The ACP represents the maximum price for which thermal RECs would be purchased.
The second factor that determines the value of RECs is their availability. RECs wil have optimal value when the number of RECs available is less than the minimum number of RECs required to be acquired by the utilities. If there are more RECs available than required to be purchased, the REC value diminishes. As noted above, the obligation for Class I Thermal RECs in New Hampshire will be increasing significantly over the next several years, making market saturation unlikely.
How Many RECs will a Geothermal Heat Pump Produce?
The thermal renewable energy produced by a geothermal heat pump depends on both its capacity (how many tons) and how long it operates in a year. We have found that a single 4-ton heat pump in a single family residence will produce approximately 18-20 MWh-thermal per year, equating to 18-20 RECs. At $25 per REC, a residence with a 4-ton heat pump can expect a maximum REC value of approximately $450-$500 per year.
How Much Does it Cost to Participate in the REC Market?
The two main costs incurred are related to the metering and reporting of the thermal renewable energy produced. While the NH PUC has worked hard to develop methods that keep costs to a minimum, the legislation does require on-site metering. For systems with a capacity less than 150,000 Btu/hr (12.5 tons), metering can be accomplished by metering heat pump runtime and using certified heat pump performance data to calculate the thermal energy produced. The runtimes and associated computations must then be reported to the NEPOOL GIS by an Independent Monitor, an individual registered with the NH PUC.
Metering equipment costs can vary, ranging from no cost (if already using an Ecobee Smart thermostat), to approximately $400 to meet minimum requirements, to several thousand dollars for systems requiring a heat meter. For more information on metering, please visit our NH Thermal RECs – Metering Options page.
In addition to the metering hardware, an Independent Monitor is required to perform an on-site inspection of the meter (one-time fee) and then certify and report thermal renewable energy produced quarterly to the NEPOOL GIS (nominal annual fee). Larger commercial systems can expect additional costs associated with meter specification, installation, and commissioning.
The Bottom Line
Assuming a net yield of $20/REC, the operating cost of a geothermal heat pump system with a COP of 4 can be reduced from $11 per Million BTUs (MMBTUs) to $5 per Million BTUs, compared to $26/MMBTU for oil, $36/MMBTU for propane, and $45/MMBTU for electric heat.